The Philly Stock Exchange and the Death of America’s Cities

By Heidi N. Moore

Are America’s cities becoming irrelevant?

Yesterday, the NASDAQ OMX Group officially took over the Philadelphia Stock Exchange, which was founded in 1790. At the time, George Washington was president, Rhode Island became the last of the original 13 states to ratify the Constitution, and Alexander Hamilton introduced the first Federal budget. Now the new exchange will be named the NASDAQ OMX PHLX, a bewildering phalanx of capital letters.

Associated Press

But the Philly’s sale reminded us of the fading prominence of America’s cities as, in the business world, they become subsumed to New York and Los Angeles.

As the Philly grew, it took over smaller exchanges. It rolled up the old Baltimore, the Washington and the Pittsburgh stock exchanges. Where are those cities now? Baltimore is best known for being the city in The Wire. Washington became all about politics. Pittsburgh housed U.S. Steel and was technically the birthplace of Standard Oil, a company more closely associated with Cleveland; but last year, one of Pittsburgh’s biggest remaining financial companies, Mellon Financial, was sold to the Bank of New York.

You can see the same echoes of a fading middle America in the recent sale of St. Louis-based Anheuser-Busch companies — the last major American-owned brewer — to Belgian-Brazilian brewer InBev. Anheuser-Busch’s sale came because of the company’s own lagging growth and stock price. Local politicians opposed the deal because the loss of a large St. Louis-heaquartered company represented a reality that was awkward at best.

The nation’s airlines, of course, had long realized that reality. St. Louis used to be a major hub for airlines; it is no longer. Have you tried getting a flight to Memphis? Sometimes it seems harder than booking a jaunt to Malaysia. In fact, given the rising cost of flying big airplanes, it is barely profitable for big airlines to make most domestic flights; that’s why giants like Delta, Northwest, Continental and American have increasingly set their sights overseas. (American, for instance, maintains a close relationship with British Airways.)

On the lighter side, we looked at Outside Magazine this month. It features a list of the “2008 Dream Towns.” It is startling how many of them were old industrial or railroad towns that fell on hard times. Chattanooga, Tenn.; Ogden, Utah, which was once a major railroad junction; Portsmouth, New Hampshire, a former 18th century shipbuilding center; Tacoma, Wash. — once called “the city of destiny” because it was the terminus for the Northern Pacific Railroad — saw trains stop running to its Union Station in the 1980s and has now made itself over as a major college town.

There are a very few cities that can actually turn the tide, although they try. Native Midwesterner Matt Miller wrote in The Deal magazine earlier this year about Milwaukee’s attempts to rebuild its Rust Belt glory. Chicago is still thriving, because it correctly pinpointed the death of manufacturing and transform itself into a town of investment bankers, traders, consultants and wealth advisers.

The Philly Exchange, of course, isn’t dead; if anything, it will have a new and stronger future under the tutelage of the more experienced and efficient Nasdaq. But its sale does show that a bet on American cities isn’t always a winning one: back in 2005, investment banks started putting bets on regional exchanges including the Philly, giving them money in order to make them stronger competitors to the much bigger Nasdaq and NYSE. All that money did, however, was make the investment banks rich on the sale and regional exchanges a much tastier meal for the giants. Writ large, is that now the story of America?

Updated: We updated this to give a nod to Cleveland and Chicago. See comments below.

Comments (5 of 22)

i just wonder how many of the save bud people drive foreign cars? sure toyota, honda, etc. are made in the usa but most all taxes go to their home countries not the usa, not to mention all the tax subsidies given to them for years to come, making our own auto industry unable to compete.so lets get real, if everyone protesting would drive american and drink american bud would be buying inbev and the big three would be thriving. to little to late.

Buffet,Pickens,Ichan.Why don't you three buy Anheuser Busch,and keep it american owned.Save the AMERICAN workers from brtios axe.

6:53 pm July 28, 2008

Jef wrote :

Last time I checked NYC was ranked #2, and CHICAGO was ranked #4(2007) on the list of world's best financial cities. They were the only two U.S. cities in the top 5. L.A. was ranked #10. Wake up! #1 London, #3 Tokyo, #5 Hong Kong.

11:32 pm July 27, 2008

Mike wrote :

Let's analyze your argument that NYC & LA will subsume the the rest of country given the consolidation of corporate headquarters and stock exchanges to these cities. If your logic is correct, then I would bet on Texas rather than NYC or LA. It has more Fortune 500 companies than New York or California. As for stock exchanges, consolidation is occurring more because of electronic trading than the failure of these cities. There is no reason for regional exchanges exist if trading goes electronic. In fact, this trend will probably hurt NYC in the long run. If traders and bankers can do their job anywhere using electronic trading & telecommuting, many NYC finance jobs might fly south take advantage of the better climate in cities like Miami. This article was a nice attempt to make New Yorkers feel good about paying $2000/month for their studios but in the future you should check your facts before making these kind of statements.

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